Do Poverty Traps Exist?

This paper reviews the empirical evidence on the existence of poverty traps, understood as self-reinforcing mechanisms through which poor individuals or countries remain poor. Poverty traps have captured the interest of many development policy make...

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Bibliographic Details
Main Authors:	Kraay, Aart, McKenzie, David
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	ABSOLUTE VALUE AGGREGATE LEVEL AGRICULTURE AMOUNT OF CAPITAL ANNUAL GROWTH ANTI-POVERTY AVERAGE GROWTH BANK POLICY CAPITAL ACCUMULATION CAPITAL INVESTMENT CAPITAL INVESTMENTS CAPITAL MARKET CAPITAL STOCK CASH TRANSFERS CONSUMPTION GROWTH COORDINATION FAILURE COORDINATION FAILURES COUNTRY DATA COUNTRY LEVEL CREDIT CONSTRAINTS CREDIT MARKET CREDIT MARKETS DEVELOPING COUNTRIES DEVELOPMENT COUNTRIES DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DEVELOPMENT RESEARCH DIMINISHING RETURNS DISADVANTAGED AREAS DIVERSIFICATION DIVERSIFIED PORTFOLIOS ECONOMETRICS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC LITERATURE ECONOMIC STUDIES ECONOMIC THEORY ECONOMICS ELIGIBILITY EMPIRICAL EVIDENCE EQUILIBRIUM ESTIMATION METHOD EXTREME POVERTY EXTREMELY POOR HOUSEHOLDS FAMINE FAMINES FARMERS FIXED ASSET FIXED CAPITAL FIXED COSTS FOOD INTAKE GDP PER CAPITA GEOGRAPHIC POVERTY TRAPS GLOBAL POVERTY GROWTH MODEL GROWTH MODELS GROWTH PERFORMANCE GROWTH PROSPECTS GROWTH RATE GROWTH RATES GROWTH REGRESSIONS HEADCOUNT POVERTY HOLDING HOUSEHOLD CONSUMPTION HOUSEHOLD INCOME INCOME INCOME DISTRIBUTION INCOME DYNAMICS INCOME GAINS INCOME GROWTH INCOME LEVEL INCOME LEVELS INCREASING RETURNS INCREASING RETURNS TO SCALE INEQUALITY INFORMAL CREDIT INSURANCE INTERNATIONAL BANK INVENTORIES INVESTING INVESTMENT RATE INVESTMENT RATES INVESTMENT TECHNOLOGIES LAND DEGRADATION LIQUIDITY LOTTERY LOW INCOME M1 M2 MACROECONOMICS MALNUTRITION MARGINAL PRODUCT MARGINAL PRODUCTIVITY MARGINAL RETURN MARGINAL RETURNS MARGINAL UTILITY MARGINAL UTILITY OF CONSUMPTION MARKET FAILURES MICROENTERPRISES MICROFINANCE NPL NUTRITION PER CAPITA GROWTH PER CAPITA INCOME PER CAPITA INCOMES PERSISTENT POVERTY POLICY AREAS POLICY IMPLICATIONS POLICY INTERVENTIONS POLICY MAKERS POLICY PERSPECTIVE POLICY RESEARCH POLITICAL ECONOMY POOR POOR AREAS POOR COUNTRIES POOR INDIVIDUALS POOR POPULATION POOR RURAL AREAS POVERTY RATES POVERTY TRAPS PRODUCTION FUNCTION PRODUCTIVE ASSETS PRODUCTIVE INVESTMENTS PRODUCTIVITY PROPERTY RIGHTS PURCHASING POWER REAL GDP REMOTE RURAL AREAS RISING DEMAND RISK MANAGEMENT RURAL RURAL REGIONS RURAL ROADS RURAL WOMEN SAVING FUNCTION SAVING RATE SAVINGS SMALL BUSINESS SMALL BUSINESSES STANDARD DEVIATION STANDARD OF LIVING TARGETING TOTAL FACTOR PRODUCTIVITY TOTAL FACTOR PRODUCTIVITY GROWTH TRANSITION ECONOMIES ULTRAPOOR UNEMPLOYMENT WAGES WAR WATER AVAILABILITY WEALTH WORKERS EXPERIENCE WORKING CAPITAL
Online Access:	http://documents.worldbank.org/curated/en/2014/04/19354776/poverty-traps-exist http://hdl.handle.net/10986/17719

Description
Summary:	This paper reviews the empirical evidence on the existence of poverty traps, understood as self-reinforcing mechanisms through which poor individuals or countries remain poor. Poverty traps have captured the interest of many development policy makers, because poverty traps provide a theoretically coherent explanation for persistent poverty. They also suggest that temporary policy interventions may have long-term effects on poverty. However, a review of the reduced-form empirical evidence suggests that truly stagnant incomes of the sort predicted by standard models of poverty traps are in fact quite rare. Moreover, the empirical evidence regarding several canonical mechanisms underlying models of poverty traps is mixed.

Do Poverty Traps Exist?

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